Understanding the 3 Major Types of Business Intelligence: A Comprehensive Guide
Introduction
In the digital age, data is everything. Businesses across all sectors gather and analyze data to gain insights into their operations and identify opportunities for growth. Business intelligence (BI) is the practice of using data analysis tools and techniques to gain insights and make informed decisions. There are three major types of BI: descriptive, predictive, and prescriptive. In this comprehensive guide, we will provide an overview of each type of BI, explain the differences between them, and provide real-world examples to help you understand how they can benefit your business.
Descriptive Business Intelligence
Descriptive BI is the most common type of BI. It involves collecting historical data and using it to create reports and dashboards that describe what happened in the past. Descriptive BI helps businesses identify trends, patterns, and anomalies in their data, which can be used to make informed decisions. This type of BI is focused on answering the question “What happened?”.
For example, a retail business may use descriptive BI to analyze sales data from the past year to identify which products were the best-sellers and which ones underperformed. They may also use this data to determine which stores saw the most foot traffic and which ones had the highest conversion rates.
Predictive Business Intelligence
Predictive BI involves using statistical models and machine learning algorithms to analyze historical data and make predictions about what will happen in the future. This type of BI is focused on answering the question “What is likely to happen?”.
For example, a bank may use predictive BI to analyze customer data and identify which customers are most likely to leave in the next six months. This information can be used to develop targeted retention strategies to keep those customers loyal.
Prescriptive Business Intelligence
Prescriptive BI is the most advanced type of BI. It involves using machine learning algorithms and optimization techniques to analyze data and provide recommendations on what actions to take. This type of BI is focused on answering the question “What should we do?”.
For example, an e-commerce business may use prescriptive BI to analyze customer data and recommend which products to offer each customer. This can lead to more personalized shopping experiences and increased customer loyalty.
Conclusion
In conclusion, business intelligence is critical for modern businesses to gain insights and make informed decisions. There are three major types of BI: descriptive, predictive, and prescriptive. Descriptive BI is focused on what happened in the past, predictive BI focuses on what is likely to happen in the future, and prescriptive BI focuses on what actions to take. By understanding the differences between these types of BI and how they can benefit your business, you can make informed decisions and gain a competitive advantage.
